Help for cap­i­tal­ism to come clean

A new bill in the US is at­tempt­ing to save the sys­tem from it­self

Financial Mail - - BOARDROOM TAILS - @an­ncrotty

New Zealand has just an­nounced a clam­p­down on for­eign­ers buy­ing prop­erty in that coun­try. The move comes as in­creas­ing num­bers of Amer­ica’s su­per-rich have iden­ti­fied the dis­tant ar­chi­pel­ago as their favourite lo­ca­tion in the event of the apoc­a­lyp­tic col­lapse of cap­i­tal­ism. It is ap­par­ently par­tic­u­larly pop­u­lar among the bil­lion­aires of Sil­i­con Val­ley — they feel they know the coun­try, hav­ing watched sev­eral re­runs of Lord of the Rings.

For ex­am­ple, bil­lion­aire ven­ture cap­i­tal­ist Peter Thiel — who founded Pay­pal with Elon Musk and backed Don­ald Trump’s pres­i­den­tial cam­paign — se­cured New Zealand cit­i­zen­ship in 2011 with such an apoc­a­lypse in mind. His idea is to hop on his pri­vate jet and head to his new home in New Zealand, with a few friends, when the sys­temic col­lapse be­comes ev­i­dent.

US se­na­tor El­iz­a­beth War­ren has launched a plan to help those who would be un­able to af­ford this op­tion — even if it were still avail­able. But War­ren, a po­ten­tial pres­i­den­tial can­di­date for 2020, is at­tempt­ing some­thing much more am­bi­tious than build­ing a bolt-hole in Hob­bit-land.

She wants to avoid the apoc­a­lypse by sav­ing cap­i­tal­ism, which — un­like her Demo­cratic Party ally Bernie San­ders — she be­lieves in.

The crux of her plan is the Ac­count­able Cap­i­tal­ism Act, for which she in­tro­duced a bill in the Se­nate this month. If en­acted, it would re­quire com­pa­nies with more than $1bn in rev­enue to ap­ply for a cor­po­rate char­ter from the fed­eral gov­ern­ment. To get a char­ter, com­pa­nies would have to recog­nise that their du­ties ex­tend be­yond max­imis­ing share­holder prof­its, and 40% of the board would have to be elected by em­ploy­ees. Among the many re­quire­ments are re­stric­tions on ex­ec­u­tives trad­ing in their shares, and on po­lit­i­cal do­na­tions.

The bill is based on War­ren’s be­lief that share­holder cap­i­tal­ism threat­ens the sur­vival of cap­i­tal­ism.

It is an at­tempt to un­lock the al­most 50-year stran­gle­hold of Mil­ton Fried­man’s share­holder-based per­spec­tive, which con­tends that cor­po­ra­tions are only re­spon­si­ble to their share­hold­ers; their only so­cial re­spon­si­bil­ity is to in­crease prof­its.

This per­spec­tive has been baked into US com­pany law and fi­nance, and has spread virus-like across much of the globe. In re­cent decades, its power in the US has been re­in­forced by the ef­forts of well-re­sourced lob­by­ists.

In a Wall Street Jour­nal op-ed, War­ren ex­plains the think­ing be­hind the bill: “For the past 30 years we have put the Amer­i­can stamp of ap­proval on gi­ant cor­po­ra­tions even as they have ig­nored the in­ter­ests of all but a tiny slice of Amer­i­cans. We should in­sist on a new deal.”

One po­lit­i­cal an­a­lyst says War­ren’s un­der­ly­ing as­sump­tion is that, be­cause they have the le­gal rights of per­sons, cor­po­ra­tions should act like de­cent cit­i­zens, up­hold­ing their side of the so­cial con­tract and not act­ing like so­ciopaths whose sole obli­ga­tion is prof­itabil­ity.

If it works, the act would re­dis­tribute tril­lions of dol­lars from the su­per-rich to mid­dle-class Amer­i­cans. Which is why War­ren is prob­a­bly brac­ing for a vi­cious and well-or­ches­trated back­lash — par­tic­u­larly from those who were plan­ning to re­lo­cate to New Zealand.

El­iz­a­beth War­ren is at­tempt­ing some­thing much more am­bi­tious than build­ing a bolt-hole in Hob­bit-land

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